The Globe and Mail reports in its Wednesday edition that Canada's Big Six banks have released their second quarter earnings, revealing concerns about a potential economic downturn. The Globe's guest columnist Hanif Bayat writes that provisions for credit losses (PCL) as a percentage of total loans have reached the highest level since early 2010, excluding temporary spikes during the pandemic. With all six major banks included in the data, it is evident they are bracing for a worsening credit environment as economic challenges threaten borrowers' ability to repay loans. While most earnings metrics reflect past performance, the provision for credit losses is forward-looking. It represents the funds banks set aside during the quarter to guard against potential defaults in the near future. Banks manage credit risk through a reserve called the allowance for credit losses (ACL), a buffer designed to absorb losses from unpaid loans. This reserve decreases when loans are written off and increases when new provisions are added or previously written-off loans are recovered. Canadian banks are preparing for a deteriorating credit environment, as economic headwinds threaten borrowers' ability to meet their loan obligations.